After the initial impact of the March 2020 lockdown on the United States economy, the technology industry and Silicon Valley exploded in earnings, growth, and hiring. Remote working became the only option and allowed tech workers to work literally from anywhere in the world. But the pandemic boom is over, and the economy is sharply correcting. Declining stock prices, inflation, and rising interest rates have led to massive layoffs.
In fact, since the start of 2022, more workers in tech have been laid off than in 2020 and 2021 combined (95,991): 121,000.
Despite the United States unemployment rate hovering between 3.5-3.7% since April, layoffs are continuing to strike workers particularly in “big tech” outfits such as Meta, Twitter, Amazon, and more.
Why are all the technology companies laying off?
According to Roger Lee, creator of Layoffs.fyi, part of the reason that there are so many layoffs in the tech industry is that they are larger now in recent years than ever before.
“Tech companies went on a hiring spree in late 2020 through 2021 as people increasingly turned to technology to work, shop and socialize. The Fed’s easy monetary policy also enabled tech companies to raise capital and invest in growth,” Lee said.
But these trends quickly corrected throughout 2022, especially come August. Suddenly, hiring freezes and layoffs dominated headlines across tech.
Companies making cuts now likely grew too quickly or added too many employees during the pandemic which was an unsustainable period of growth.
November marks the deepest cuts thus far in 2022, with 45,000 tech company employees laid off. This is more than three times the number in October. Meta, Twitter, Salesforce, and Cisco account for 19,000 of the 45,000 jobs lost alone.
When will tech layoffs stop?
According to Lee and other economists, tech layoffs won’t stop or significantly slow down until the Federal Reserve is able to slow down inflation.
The Fed has raised interest rates numerous times in 2022, from near-zero in March to the 4.25%-4.50%. Yet, Fed Chair Jerome Powell says “we have a long way to go.”
“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said. “We will stay the course until the job is done.”
The central bank meets again on December 13-14 and is expected to approve another half-percentage point increase in interest rates.
“Silicon Valley has cycles,” said Russel Hancock, CEO of Joint Venture Silicon Valley. “We go up, we go down. It happens with regularity about every 10 years.”
“The pandemic turned out to be a bonanza for tech; but it just turned out to be a spike and didn’t lead us to a new plateau. Now, demand is tapering,” said Hancock.
